o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
98-0533824
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
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Page
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PART
I - FINANCIAL INFORMATION
|
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ITEM
1 - FINANCIAL STATEMENTS
|
|||
Consolidated
Balance Sheets as of February 28, 2009 (Unaudited) and August 31,
2008
|
3
|
||
Consolidated
Statements of Operations and Comprehensive Income for the six months
ended February 28, 2009 and February 29,
2008
|
4
|
||
Consolidated
Statements of Cash Flows for the six months ended February 28, 2009 and
February 29, 2008
|
5
|
||
Notes
to Unaudited Consolidated Financial Statements
|
6 -
11
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||
ITEM
2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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12
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||
ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
16
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ITEM
4 (A) - CONTROLS AND PROCEDURES
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16
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||
ITEM
4 (A)T – INTERNAL CONTROL OVER FINANCIAL REPORTING
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16
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PART
II - OTHER INFORMATION
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|||
ITEM
1 - LEGAL PROCEEDINGS
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17
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||
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
17
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||
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
|
17
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||
ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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17
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ITEM
5 - OTHER INFORMATION
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17
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ITEM
6 – EXHIBITS
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17
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SIGNATURES
|
17
|
Feb
28,
|
Aug
31,
|
|||||||
2009
|
2008
|
|||||||
|
|
|||||||
ASSETS | ||||||||
Current
Assets
|
||||||||
Cash and cash equivalents
|
$ | 375,429 | $ | 415,031 | ||||
Accounts receivable, net (Note 3)
|
6,851,264 | 2,231,363 | ||||||
Advances (Note 5)
|
3,537,190 | 3,772,367 | ||||||
Notes receivable
|
- | 868,593 | ||||||
Due from related parties
|
- | 53,516 | ||||||
Inventory (Note 4)
|
4,006,192 | 3,275,570 | ||||||
Prepaid expenses and other receivables
|
1,163,715 | 1,530,022 | ||||||
Total
Current Assets
|
15,933,790 | 12,146,462 | ||||||
Property,
plant and equipment, net (Note 6)
|
50,188,678 | 51,499,895 | ||||||
Intangible
Assets & Deferred Charges (Note 7)
|
4,481,211 | 4,615,689 | ||||||
Total
Assets
|
$ | 70,603,679 | $ | 68,262,046 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current
Liabilities
|
||||||||
Payables and accrued liabilities (Note 8)
|
$ | 23,119,655 | $ | 14,627,928 | ||||
Customer deposit
|
- | 1,001,178 | ||||||
Short-term loans (Note 9)
|
438,030 | 438,570 | ||||||
Due to Related Parties (S/T, Note 10)
|
22,054,945 | 27,805,125 | ||||||
Taxes payable
|
368,351 | 2,042,701 | ||||||
Wages payable
|
223,022 | 331,341 | ||||||
Total
Current Liabilities
|
46,204,003 | 46,246,843 | ||||||
Total
Liabilities
|
46,204,003 | 46,246,843 | ||||||
Commitments
and Contingencies (Note 11)
|
||||||||
Stockholders'
Equity
|
||||||||
Preferred Stock: 20,000,000 shares authorized, $0.0001 par value, No
shares issued and outstanding
|
- | - | ||||||
Common Stock: 200,000,000 shares authorized, $0.0001 par value, 78,832,064
shares issued and outstanding
|
7,883 | 7,883 | ||||||
Additional paid in capital
|
12,327,962 | 12,327,962 | ||||||
Accumulated other comprehensive income
|
2,570,817 | 2,595,790 | ||||||
Retained earnings
|
9,493,014 | 7,083,568 | ||||||
Total
Stockholders' Equity
|
24,399,676 | 22,015,203 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 70,603,679 | $ | 68,262,046 |
For
the Three Months Ended
|
For
the Six Months Ended
|
|||||||||||||||
February
28,
2009
|
February
29,
2008
|
February
28,
2009
|
February
29,
2008
|
|||||||||||||
Revenue | $ | 9,290,749 | $ | 5,908,827 | $ | 25,041,160 | $ | 16,220,113 | ||||||||
Cost
of goods sold
|
9,565,813 | 4,973,977 | 23,263,320 | 12,764,571 | ||||||||||||
Gross
Profit (Loss)
|
(275,064 | ) | 934,850 | 1,777,840 | 3,455,542 | |||||||||||
Operating
Costs and Expenses:
|
||||||||||||||||
Selling
expenses
|
87,370 | 24,131 | 159,422 | 40,441 | ||||||||||||
G&A
expenses:
|
513,129 | 398,922 | 886,792 | 852,971 | ||||||||||||
Depreciation
of property, plant and equipment
|
37,852 | 21,921 | 75,640 | 43,087 | ||||||||||||
Total
operating costs and expenses
|
638,351 | 444,974 | 1,121,854 | 936,499 | ||||||||||||
Income
From Operations
|
(913,415 | ) | 489,876 | 655,986 | 2,519,043 | |||||||||||
Interest income (Expense)
|
(15,851 | ) | (21,883 | ) | (35,635 | ) | (24,164 | ) | ||||||||
Reversal of allowance for doubtful accounts
|
- | 209,537 | - | 209,537 | ||||||||||||
Government subsidies/Grants
|
1,506,787 | - | 2,238,678 | - | ||||||||||||
Other income (expenses)
|
(4,359 | ) | 11,311 | (67,143 | ) | 104,725 | ||||||||||
Income
Before Income Taxes
|
573,162 | 688,841 | 2,791,886 | 2,809,141 | ||||||||||||
Income taxes expense (benefit)(Note 12)
|
(171,311 | ) | (163,486 | ) | 382,440 | 524,198 | ||||||||||
Net
Income
|
$ | 744,473 | $ | 852,327 | $ | 2,409,446 | $ | 2,284,943 | ||||||||
Other
Comprehensive Income (Loss)
|
||||||||||||||||
Foreign
currency translation adjustment
|
(24,890 | ) | 590,299 | 24,974 | 915,942 | |||||||||||
Comprehensive
Income
|
$ | 719,583 | $ | 1,442,626 | $ | 2,434,420 | $ | 3,200,885 | ||||||||
Earnings
Per Share - Basic and Diluted
|
$ | 0.01 | $ | 0.01 | $ | 0.03 | $ | 0.03 | ||||||||
Weighted
Average Shares Outstanding - Basic and Diluted
|
78,832,064 | 78,832,064 | 78,832,064 | 77,044,944 |
For
the Six Months Period Ended
|
||||||||
February
28, 2009
|
February
29, 2008
|
|||||||
|
|
|||||||
Operating
activities
|
||||||||
Net income
|
$ | 2,409,446 | $ | 2,284,943 | ||||
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
||||||||
Reversal of allowance of doubtful accounts
|
- | (209,537 | ) | |||||
Amortization
|
128,788 | |||||||
Depreciation expense
|
2,050,958 | 1,299,670 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts receivable, net
|
(4,616,368 | ) | 2,638,811 | |||||
Notes receivable
|
867,523 | 268,552 | ||||||
Advances to suppliers
|
230,519 | (4,685,990 | ) | |||||
Prepaid expenses and other receivables
|
416,483 | (34,159 | ) | |||||
Inventory
|
(734,613 | ) | (592,875 | ) | ||||
Accounts payable and accrued liabilities
|
8,510,964 | (507,849 | ) | |||||
Customer Deposit
|
(999,945 | ) | (619,360 | ) | ||||
Tax payable
|
(1,671,835 | ) | 658,045 | |||||
Wages payable
|
(108,183 | ) | 63,697 | |||||
Net
cash provided by operating activities
|
6,483,737 | 563,948 | ||||||
Investing
activities
|
||||||||
Changes in due from related parties
|
53,450 | 15,267 | ||||||
Property, plant and equipment additions
|
(803,268 | ) | (1,744,656 | ) | ||||
Net
cash used in investing activities
|
(749,818 | ) | (1,729,389 | ) | ||||
Financing
activities
|
||||||||
Short term loan proceeds (repayment)
|
- | (1,166,247 | ) | |||||
Repayments of due to related parties
|
(5,715,952 | ) | 2,145,177 | |||||
Capital distribution
|
- | (12,889 | ) | |||||
Net
cash provided by (used in) financing activities
|
(5,715,952 | ) | 966,041 | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
(57,569 | ) | (961,067 | ) | ||||
Increase
(decrease) in cash and cash equivalents
|
(39,602 | ) | (1,160,467 | ) | ||||
Cash
and cash equivalents, beginning of year
|
415,031 | 1,400,479 | ||||||
Cash
and cash equivalents, end of year
|
$ | 375,429 | $ | 240,012 | ||||
Supplemental
Disclosures
|
||||||||
Interest Paid
|
$ | 23,037 | $ | 46,411 | ||||
Income taxes paid
|
$ | 1,438,724 | $ | - |
Building | 20 years |
Manufacturing
machinery & equipment
|
8
years
|
Electronic
equipment & automobiles
|
5
years
|
Office
equipment
|
5
years
|
Feb-28-09
|
Aug-31-08
|
|||||||
Notes
Receivable
|
$ | 0 | $ | 868,593 | ||||
Accounts
Receivable –Trade
|
$ | 6,851,264 | $ | 2,231,363 | ||||
Allowance
for Doubtful Accounts
|
0 | 0 | ||||||
$ | 6,851,264 | $ | 3,099,956 |
Feb-28-09
|
Aug-31-08
|
|||||||
Raw
Materials
|
$ | 1,198,784 | $ | 1,539,946 | ||||
Packaging
Materials
|
54,708 | 51,682 | ||||||
Semi-Finished
Goods
|
1,570,248 | 340,678 | ||||||
Finished
Goods
|
1,182,452 | 962,227 | ||||||
Supplies
|
0 | 381,037 | ||||||
$ | 4,006,192 | $ | 3,275,570 |
Feb-28-09
|
Aug-31-08
|
|||||||
Advances
|
$ | 3,537,190 | $ | 3,772,367 |
Feb-28-09
|
Aug-31-08
|
|||||||
Building
- Cost
|
$ | 27,800,885 | $ | 22,270,871 | ||||
Building
- Accumulated Depr
|
(2,747,048 | ) | (2,103,678 | ) | ||||
Building
- Net
|
25,053,837 | 20,167,193 | ||||||
Equipment
& Machinery - Cost
|
31,068,200 | 18,712,633 | ||||||
Equipment
& Machinery - Accumulated Depr
|
(6,973,315 | ) | (5,607,996 | ) | ||||
Equipment
& Machinery - Net
|
24,094,885 | 13,104,637 | ||||||
Automobiles
- Cost
|
292,501 | 292,862 | ||||||
Automobiles
– Accumulated Depr
|
(123,623 | ) | (95,953 | ) | ||||
Automobiles
- Net
|
168,878 | 196,909 | ||||||
Other
Equipment - Cost
|
30,930 | 56,880 | ||||||
Other
Equipment - Accumulated Depr
|
(13,691 | ) | (11,208 | ) | ||||
Other
Equipment - Net
|
17,239 | 45,672 | ||||||
Computer
Equipment - Cost
|
28,190 | 24,982 | ||||||
Computer
Equipment - Accumulated Depr
|
(9,268 | ) | (6,670 | ) | ||||
Computer
Equipment - Net
|
18,922 | 18,312 | ||||||
Total
Fixed Assets - Net
|
$ | 49,353,761 | $ | 33,532,723 | ||||
Construction
in progress
|
834,917 | 17,967,172 | ||||||
$ | 50,188,678 | $ | 51,499,895 |
Feb-28-09
|
Aug-31-08
|
|||||||
Mineral
rights-Limestone
|
$ | 3,487,208 | $ | 2,682,863 | ||||
Mineral
rights-Sandstone
|
238,456 | 1,124,440 | ||||||
Land
compensation fees (mine forest land requisition fees)
|
566,847 | 599,671 | ||||||
Working
area forestation fees
|
60,395 | 72,980 | ||||||
Baxiong
Village stone materials requisition expense
|
17,412 | 18,420 | ||||||
Baxiong
Limekiln mining area compensation expenses
|
15,142 | 16,019 | ||||||
Qiaomai
Village sandstone land compensation expenses
|
95,751 | 101,296 | ||||||
$ | 4,481,211 | $ | 4,615,689 |
Feb-28-09
|
Aug-31-08
|
|||||||
Accounts
payable
|
$ | 11,649,788 | $ | 8,580,607 | ||||
Other
payables
|
11,461,077 | 6,037,913 | ||||||
Accrued
liabilities
|
8,790 | 9,408 | ||||||
Payables
and accrued liabilities
|
$ | 23,119,655 | $ | 14,627,928 |
Feb-28-09
|
Aug-31-08
|
|||||||
Xianzong
credit union
|
$ | 438,030 | $ | - | ||||
Loan
from Zhongxing Bank
|
- | 438,570 | ||||||
$ | 438,030 | $ | 438,570 |
Borrowing
bank
|
Amount
|
Starting
date
|
Maturity
date
|
Interest
rate (monthly)
|
Six
Months period ended
Feb
28
|
||||||||||||
Interest
2009
|
Interest
2008
|
||||||||||||||||
Xianzong
credit union
|
438,030 |
2008-12-24
|
2009-12-23
|
0.836167 | % | $ | 8,790 | $ | - | ||||||||
Total
|
$ | 8.790 | $ | - |
Existing relationships with the
Company
|
|
Nanjin
Hongren
|
A
company controlled by shareholder
|
Nanjin
Runji
|
A
company controlled by shareholder
|
Zhao,
Shouren
|
shareholder
& president & CEO of the Company
|
Yang,
Xuanjun
|
shareholder
of the Company
|
Feb-28-09
|
Aug-31-08
|
|||||||
Due
to related party - S/T - Nanjin Hongren
|
$ | 13,942,334 | $ | 19,117,328 | ||||
Due
to related party - S/T - Nanjin Runji
|
7,127,069 | 7,135,856 | ||||||
Due
to related party - S/T - Zhao, Shouren
|
434,544 | 488,606 | ||||||
Due
to related party - S/T - Yang, Xuanjun
|
547,716 | 1,060,056 | ||||||
Miscellaneous | 3,282 | 3,279 | ||||||
$ | 22,054,945 | $ | 27,805,125 |
Six Months ended
Feb-28-09
|
Six Months
ended
Feb-29-08
|
|||||||
Income
Taxes
|
$ | 382,440 | $ | 524,198 |
(a)
|
The
Company has renewed its asset mortgage agreement with Nanjing
Runji Building Materials Industrial Ltd., Co. (“Nanjing Runji”) on March
28, 2009. On March 27, 2009, Nanjing Runji has repaid its short term bank
loan of USD$1,461,900 with an interest rate of 7.47% per annum in Nanjing
Daxinggong Branch of Bank of Construction in China commencing on April 30,
2008 and expiring on April 29, 2009. And Nanjing Runji renewed a short
term bank loan of USD$1,461,900 with an interest rate of 5.31% per annum
in Nanjing Daxinggong Branch of Bank of Construction in China commencing
on March 28, 2009 and expiring on March 27, 2010. The bank loan was
mortgaged by assets of Anhui Province Runji Cement Ltd., Co., and the
mortgage period is from March 28, 2009 to March 27, 2010. Runji provided
the mortgage to Nanjing Runji Building Materials Industrial Ltd.,
Co., including the principal of USD$1,461,900, interest (including
compound interest and default interest), penalties, claims, and other
payments that the debtor should pay to the mortgage. The mortgage asset
list below was decided by Runji’s management when it provided the mortgage
to Nanjing Runji Building Materials Industrial Ltd.,
Co.
|
Mortgage
Asset Name
|
Ownership
Certificate
No.
|
Location
|
Area
or
Quantity
|
Whether
mortgaged for other debts
|
Notes
|
|||||
Land
Usage Right
|
Han State
(2005)
No.
083
|
Xianzhong Town,
Hanshan County,
Anhui
Province
|
64,051.6
Square
Meters
|
No
|
Total
original area: 278,691 Square
Meters
|
|||||
House
|
Real
Estate Property Zi Guan
No.
06001650
|
Runji
Cement Factory Area
|
8,690.21
Square
Meters
|
No
|
||||||
House
|
Real
Estate Property Right Zi Guan No. 06001652
|
Runji
Cement Factory Area
|
3,258.63
Square
Meters
|
No
|
(b)
|
The
Company renewed a credit
guaranty agreement with Nanjing Runji Building Materials Industrial Ltd.,
Co. (“Nanjing
Runji”) on March 31, 2009. On March 30, 2009, Nanjing Runji has repaid its
one-year short term bank loan of USD$2,923,763 with an interest rate of
7.47% per annum from Daxinggong Branch of Bank of Construction in China
commencing on March 31, 2008 and expiring on March 30, 2009. And Nanjing
Runji renewed its one-year short term bank loan of USD$2,923,763 with an
interest rate of 5.31% per annum from Daxinggong Branch of Bank of
Construction in China commencing on March 31, 2009 and expiring on March
30, 2010. Runji Cement provided credit guaranty to Nanjing Runji Building
Materials Industrial Ltd., Co. The guaranty period is from March 31, 2009
until the maturity of the bank loan two years thereafter. The credit
guaranty includes the principal of USD$2,923,763, interest (including
compound interest and default interest), penalties, claims, and other
payments that the debtor should pay to the
mortgage.
|
§
|
Demand
and piggy-back registration rights were granted to the Ren Shareholder
with respect to shares of the Company’s restricted common stock to be
acquired by him at closing in a Regulation S
offering.
|
§
|
On
the Closing Date, the current officers of FitMedia resigned from such
positions and the persons chosen by Anhui Runji were appointed as the
officers of FitMedia, notably Shouren Zhao, as Chairman, CEO and President
and Yichun Jiang as CFO.
|
§
|
On
the Closing Date, Crottey resigned from his position as a director
effective upon the expiration of the ten day notice period required by
Rule 14f-1, at which time additional persons designated by Anhui Runji
were appointed as directors of FitMedia, notably Liming Bi and Xuanjun
Yang.
|
§
|
On
the Closing Date, FitMedia paid and satisfied all of its “liabilities” as
such term is defined by U.S. GAAP as of the
closing.
|
§
|
As
of the Closing, the parties consummated the transactions contemplated by
the Stock Purchase Agreement.
|
·
|
We plan to raise adequate capital over the next five years for expansion and growth. |
·
|
We
have invested over USD$50 million to build up one cement production line
with daily production of 2,500 tons and one cement clinker production line
with daily production of 2,500 tons. The newly invested cement clinker
production line was put into operation in October
2008.
|
·
|
We
plan to complete the investment of USD$10 million to establish a waste
heat power generator system to convert waste heat into electricity in
2009, which is expected to save about USD$4.6 million per year in
electricity costs. After the completion of the generator system, we will
significantly improve our margins and reduce reliance on outside power
sources.
|
For
the Three Months Ended
|
For
the Six Months Ended
|
|||||||||||||||||
February
28, 2009
|
February
29, 2008
|
Difference
|
February
28, 2009
|
February
29, 2008
|
Difference
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Revenue
|
$ | 9,290,749 | $ | 5,908,827 | $ | 3,381,922 | $ | 25,041,160 | $ | 16,220,113 | $ | 8,821,047 | ||||||
cement
|
4,984,134 | 3,925,988 | 1,058,146 | 17,395,299 | 13,125,026 | 4,270,273 | ||||||||||||
cement
clinker
|
4,306,615 | 1,982,839 | 2,323,776 | 7,645,861 | 3,095,087 | 4,550,774 |
For
the Three Months Ended
|
For
the Six Months Ended
|
|||||||||||||||||
February
28, 2009
|
February
29, 2008
|
Difference
|
February
28, 2009
|
February
29, 2008
|
Difference
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Cost
of goods sold
|
$ | 9,565,813 | $ | 4,973,977 | $ | 4,591,836 | $ | 23,263,320 | $ | 12,764,571 | $ | 10,498,749 | ||||||
cement
|
5,484,927 | 2,807,304 | 2,677,623 | 14,862,261 | 9,498,802 | 5,363,459 | ||||||||||||
cement
clinker
|
4,080,886 | 2,166,673 | 1,914,213 | 8,401,059 | 3,265,769 | 5,135,290 |
For
the Three Months Ended
|
For
the Six Months Ended
|
||||||||||||||||||||||
February
28, 2009
|
February
29, 2008
|
Difference
|
February
28, 2009
|
Fenruary
29, 2008
|
Difference
|
||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||||||||||
Gross
Profit
|
$ | (275,064 | ) | $ | 934,850 | $ | (1,209,914 | ) | $ | 1,777,840 | $ | 3,455,542 | $ | (1,677,702 | ) | ||||||||
cement
|
(500,793 | ) | 1,118,684 | (1,619,477 | ) | 2,533,038 | 3,626,224 | (1,093,186 | ) | ||||||||||||||
cement
clinker
|
225,729 | (183,834 | ) | 409,563 | (755,198 | ) | (170,682 | ) | (584,516 | ) |
31.1
|
Certification
of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934
|
31.2
|
Certification
of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934
|
32.1
|
Certification
of the Company's Chief Executive Officer Pursuant to 18 U.S.C. SS. 1350
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
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Certification
of the Chief Financial Officer Pursuant to 18 U.S.C. SS. 1350 Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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CHINA
RUNJI CEMENT INC.
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Date:
April 14, 2009
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By:
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/s/
Shouren Zhao
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Shouren
Zhao
Chairman
and Chief Executive
Officer
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